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Critiquing The Ever Ambiguous Financial Aid Letter

If you have ever heard of the name Mark Kantrowitz, I can almost guarantee that the topic had to do with Financial Aid, Student Loans, or Paying For College. He has been a long-time advocate of education and helps families to tackle some of the most common (and uncommon) financial hurdles along the way. His most recent book, Secrets to Winning a Scholarship, was released in February.

Mr. Kantrowitz has a new report that is lobbying for the standardization of financial aid awards from colleges. He argues that the current approach taken by colleges and universities to inform parents/students about their expected costs and the subsequent aid they will be receiving is confusing and, in some instances, maybe even a little deceiving…  As a person that consistently works with families to help decipher financial aid packages, I can totally relate to Mr. Kanrowitz’s position on the topic. The only thing that I will add is that sometimes the confusing aspect is brought about because this is the first time many families have seen these types of documents and the language (as familiar as it may be to college administrators) is not so familiar of territory for families.

Mr. Kantrowitz’s 37 page report provides a compelling argument for changing the way award packages are communicated to families. He suggests 39 optional and 59 mandatory changes that need to be implemented to financial aid award letters nationwide. The following represents a few of these suggestions:

  • Requirement that all financial aid awards be clearly identified according to type of award (e.g., grant, scholarship, student employment, loan, installment plan).
  • Requirement that the financial aid award letter organize the awards according to type of award, with gift aid appearing first and more burdensome award types like loans listed last.
  • Requirement that awards be identified using standard names, not acronyms, abbreviations or other cryptic terms.
  • Requirement that the financial aid award letter include a detailed breakdown of the direct and indirect cost of attendance figures.
  • Requirement that loans be clearly identified as loans, emphasizing that the loans must be repaid, usually with interest.
  • Requirement that loan listings include information about interest rates, fees, the loan term in years and the loan amount
  • Requirement that financial aid award letters include information about the student’s previous cumulative education debt (including the principal balance, capitalized interest and accrued but unpaid interest) and the corresponding monthly loan payment under a 10-year repayment term.

I would say that most of the ideas (suggestions) in Mr. Kantrowitz’s report will probably be given some consideration by colleges and universities. As a matter of fact, I think a few of these proposed ideas are being implemented on some level already within a select group of institutions. However, I can see that many of the changes would be administratively burdensome and probably not be reaching the Financial Aid Award letter anytime soon. At least with Mr. Kantrowitz’s research and proposal, colleges now have a benchmark that they can strive to achieve.

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